INFORMATION

Tuesday, December 27, 2005

When I'm onsite helping clients, I like to order soups with beef broth whenever the menu focus is steak or prime rib. The thicker and beefier versions typically correlate to lower profits. It's very difficult to get a decent menu price for items which utilize leftover prime rib. The soup gets thicker as the utility declines.

One of my customers serves an open-faced sandwich called Blackened Prime Rib. His soup was actually a robust beef stew. The sandwich does not come close to making up for over production of prime rib at night. Making prime rib a weekend only event has increased his profits substantially.

Durgin Park in Boston has a Poor Man's Special at lunch. They serve a lot more prime rib at night than they do this lunch special. The day we were there, the lunch special soldout. That's the sign of a good forecast the previous night.

This weekend, we decided to serve a rib roast for Christmas. I noticed prices had increased over the previous year at my butcher. I decided to look up the current market data. In the 12/23/05 market report, prime exports were quoted at $7.25/pound vs. $5.52 last year. That's a 31.3% increase in price. Certainly, the beef market has had plenty of negative factors to digest. The higher fuel costs and the international bans due to diseases have played a role in price escalation.

Let's put these numbers to work for our beef lovers. If you pay $145 for a 20# piece of prime export with 7 bones, you need to charge more than last year to make a decent profit. If you charged $25 in both years for the house cut with 14 portions per piece, your profit would decline $34.60 [20# x ($7.25-$5.52)].

You need an extra $2.47 a portion just to stay even. Last year, the meat alone was 31.5% of the menu price. To maintain the same center of the plate cost percentage, you'd need to charge $32.88. That's a $7.88 increase per portion. If your in a competitive market, it may be impossible to ask for an additional $7.88 a portion.

For the operators afraid to change menu prices, the center of the plate cost soars to 41.4%.

It's tough to make a decent profit with costs this high. I'd expect a number of operators to try something in the middle. A menu price increase to $29 would put more money in the bank.

Just to check, I went back to late 2003 and found prices similar to this year. Maybe last year was unusual! Should prime rib be a "Market Priced" item on your menu?

Saturday, December 24, 2005

I highly recommend www.foodservice.com and their wonderful market reports. In addition to the market data provided on their site, buyers can now access a number of excellent government sites. It's possible to get weekly updates on most perishable products. Daily quotes are available for the major markets.

Using the data to your advantage requires a simple comparison of current market conditions to supplier bids. A review of bid history will point out obvious red flag items: suppliers tend to react quickly to increases in costs at the market; suppliers tend to react slower to decreases in costs at the market; supplier salesmen tend to promote overstocked inventory items; supplier salesmen tend to promote higher margin alternatives. Careful scrutiny of bids in relation to the market prices will highlight opportunities during times of price volatility.

The best way to approach market price vs. bid price is to treat the market as a supplier. If you are inclined to work with spreadsheets, you can inflate the raw market prices with transportation and storage factors. Whether or not you use raw market costs or adjusted costs, the comparison will give you a negotiation advantage.

Before: "You're a bit high! Can't you do anything with your number?" Not too insightful.

After: "You are still quoting me the same as last week. The market corrected down 6% this week. Do you expect me to pay for your mistakes the previous week?"

Keeping a history of this activity is a great tool for vendor selection, budget forecasts and long term planning activities.

Friday, December 23, 2005

My very first real consulting project was one I remember like yesterday. The office of the restaurant was located off the dining room and often tables had to be moved to gain access. The two managing partners were brothers. The older brother handled purchasing, production, personnel, advertising and menu specials. His brother handled the bar and dining room.

The office desk was buried in thin curls of adding machine tape. A current copy of Urner Barry's Yellow Sheets was on the desk. Lenny, the older brother, asked me: "Can you get rid of all this paper?" I told him I'd help. We discussed a plan to buy a computer, printer and an inventory package. Our goal was to setup a control system to handle the portion control operation and link portions to POS data.

NOTE: The original Visual Portion Control post (from December 23, 2005) has been archived. It is available upon request. Please email me at joe@joedunbar.com for a copy.

The original Visual Portion Control system, I developed with hands-on experience on 5 real world projects with a variety of center-of-the-plate protein items, works. You can now download a full explanation of the system with actual examples fully illustrated with snapshots of Excel files.

This hard hitting 12 page report clearly shows how to implement a visual portion control system in your operation. This report is available online. Currently, this report is available with a special 50% discount. Please click the steak below to order the report.

Thursday, December 22, 2005

My heroes in the food cost control game use a playbook designed to work in pressure situations. They develop ingenious ways to order, receive, store and prep food. Final line production is a well orchestrated symphony.

If I were pressed for a single attribute these people share, I believe they focus on issues and activities which have a major positive impact. They constantly improve the environment and system to remove obstacles to success.

The absolute best advice I can give anyone trying to improve results is simple. Buy less food and pay as little as possible. Do this without sacrificing quality.

In the early stages of a food cost control project, it's important to get a clear picture of before. It may be more important than how the picture should look after completion. To establish goals, policies and reporting systems, you need to have a total understanding of the current cost control environment.